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New electricity levy a “major shot in the arm” for British CCS industry and UK climate leadership

New electricity levy a “major shot in the arm” for British CCS industry and UK climate leadership

Date

09 April 2010

International NGO The Climate Group today welcomes a new piece of UK energy legislation which will fund the development of up to four commercial-scale carbon capture and storage (CCS) projects in the UK.

The new Energy Act (2010) – introduced to the UK Parliament as a bill in November 2009 and which became law yesterday – includes a levy on electricity suppliers that will support up to four industrial scale CCS projects in the UK. The collection of the new CCS levy and the disbursal of funds will be administrated by regulator Ofgem. Details of the levy will be based on each supplier’s market share and set through regulations that will be the subject to consultation later this summer.

Jane Paxman, Director of The Climate Group’s Low Carbon Energy Programme, welcomed the news: “The new law is a major shot in the arm for the future of the CCS industry in the UK. It will cement the UK’s global leadership in developing this important low carbon technology. The news will be welcomed by all the companies that have been working hard on CCS projects for several years and have been waiting for support that will enable them to help deliver the national CO2 emissions reductions mandated under existing UK climate legislation. With the EU also due to complete its process to put CCS support in place next month, this industry-in-waiting will now be able to demonstrate the substantial contribution it can make to tackling climate change.”

The Bill, which passed its final “ping pong” stage in Parliament and received its Royal Assent, drew support from the UK’s opposition Conservative Party during the wash-up session of uncompleted legislation ahead of a general election in May.

Charles Hendry, Shadow Minister for Energy, told Bloomberg this week that his party has no substantial objections to the bill: “We think it’s an important piece of legislation.” However, Hendry added that his Party had pushed for key concessions from the Government, including extending carbon capture and storage to cover industries outside coal: “That’s the most important change we wanted in the bill.”

The UK government will use a competitive process to select which CCS projects will benefit from the new levy.

Last month, Department of Energy and Climate Change (DECC) awarded funding to Scottish Power and E.ON to conduct Front End Engineering and Design (FEED) studies in the latest stage of a UK competition to build one of the world’s first commercial scale CCS demonstration plants. It is expected the winner of this current competition will be one of the projects to be supported by this new levy.

The UK government also established a new Office for CCS (OCCS) in March and published a CCS industrial strategy saying that the CCS industry could generate upwards of £3 billion a year for the UK economy by 2030, sustaining up to 100,000 jobs.